MM Money

U.S. Trade Deficit Exceeds a Record $600 Billion

Excerpt: The American trade deficit broke the $600 billion barrier in 2004, soaring to $617.7 billion, the Commerce Department reported today.

The American trade deficit broke the $600 billion barrier in 2004, soaring to $617.7 billion, the Commerce Department reported today.

The trade deficit now accounts for more than 5 percent of the American economy, a level some economists and lawmakers said was unsustainable. The deficit also adds pressure to push down the value of the dollar and increases the amount of debt held overseas.

Domestic manufacturers, labor unions and Democrats say the growing deficit is responsible for the erosion of the American manufacturing base and the concurrent loss of jobs.

The annual report showed that the United States lost ground last year not only in manufacturing but also in advanced technology products and services, two of the country's strongest sectors. The deficit in technology products grew to $37 billion last year while the surplus for services including banking, insurance and investment shrunk to $48.5 billion, the lowest since 1991.

The Bush administration disagreed with the economists who said the trade deficit was worrisome. Instead, Treasury Secretary John W. Snow said through a spokesman that the report showed the American economy was growing, albeit through consumption rather than production. The imbalance, he said, was a reflection of the ability of American consumers to buy more imports and showed that the American economy was growing faster than those of other nations.

"We are importing more than those other economies, because we are creating more disposable income than they are," said Rob Nichols, chief spokesman at the Treasury Department.

The annual deficit with China also set a record at $162 billion, becoming the largest trade imbalance ever recorded by the United States with a single country. Democrats in Congress seized on that figure to repeat their demands that the administration push Beijing to raise the value of its currency, which many contend is too low against the dollar and thus responsible for the poor performance of American exports to China.

American textile manufacturers and the biggest business organizations have asked the administration to bring China to the World Trade Organization for unfair trading practices that they say are creating the trade deficit. The business group estimates that the United States loses $200 billion every year from China's piracy and counterfeiting of American goods. A textile trade group is also asking for a moratorium on new trade agreements until the root causes of the trade deficit are addressed.

READ FULL STORY ...

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